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2013 (2) TMI 125 - AT - Income TaxAddition u/s. 68 - assessee had received gifts from 4 NRI s staying abroad friends - CIT(A) deleted the addition upto Rs.8,76,000/- out of Rs.26,55,968/- - Held that - In case of Shri Ramanbhai Patel though the gift given is of Rs.870000/- only the copy of confirmation, passport and certificate of the bank issuing Demand Draft is on record. The copy of his income tax return is not on record and therefore in his case, the capacity to gift cannot be proved. In the case of Shri Suresh Patel, it can be seen that in the income tax return he has stated that he is unemployed and has filed return of income jointly with his wife and the total joint income after payment of tax is USD 1741 and he has said to have given a gift of USD 10349 to the assessee. Thus the gift appears to be far in excess of the after tax income for the year earned by the assessee jointly with his wife.In case of Shri Dilip Patel, his total joint income along with his wife after payment of taxes is USD 42523. He is stated to have given gift of USD 10267 to assessee. The gift thus works out to 24% of their joint income. Further the details of their income tax return reveals that they have stated to have given aggregate gift of USD 251 in the year. Thus their total gifts as reported in their Income tax return is of USD 251. In the present case Shri Dilip Patel has stated to have given gift of over USD 10,000 to assessee which therefore leads to the conclusion that the gift to assessee has not been disclosed by them in the return of Income.In the case of Shri Vipul Patel his joint total income along with his wife after payment of taxes for calendar year 2004 is USD 34764. The gift of USD 10023 to assessee thus amounts to around 29% of their joint income after payment of tax. Thus nothing has been brought on record to prove the relationship between the donor and donee that necessitated the love and affection which could result into giving of gift. The part relief granted by the CIT (A) was in cryptic manner stating that since the A.O. has not given any finding, the general observation of the A.O. that the credits were not genuine has to be rejected in respect of these two donors, as the initial onus of the appellant stands discharged as the reason given for granting relief in respect of the impugned two donors appears to be non-convincing especially when the A.O. has given findings of facts. Thus unless the bank statement are supported by any other corroborative evidence to establish the financial capacity of the donors the bank statements do not prove the credit worthiness of the donors for showing that they were financially sound for making such gifts because the bank statements merely indicate the movement of the funds and not the credit worthiness of the account holder. Thus considering the factual matrix, the totality of facts as seen in the background of decision in the case of Rajeev Tandon (2007 (7) TMI 40 - HIGH COURT , DELHI) and TIRATH RAM GUPTA 2006 (9) TMI 166 - PUNJAB AND HARYANA HIGH COURT the action of the A.O. in treating the gifts as income cannot be faulted - against assessee.
Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act by the CIT (A). 2. Confirmation of addition under Section 68 of the Income Tax Act by the CIT (A). Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68 by the CIT (A): The Revenue challenged the deletion of an addition of Rs. 13,11,500 made under Section 68 by the Assessing Officer (A.O.). The A.O. had added this amount to the income of the assessee as cash credit because the assessee could not prove the creditworthiness of the depositor with sufficient documentary evidence. During the assessment proceedings, the A.O. observed that the assessee received gifts in the form of demand drafts totaling Rs. 21,87,500 from four NRIs. The A.O. treated this amount as unexplained cash credit under Section 68 due to the absence of a satisfactory reply from the assessee. Upon appeal, the CIT (A) partially accepted the assessee's explanation and deleted the addition for two of the donors, stating that the A.O. did not provide any specific findings in the remand report concerning these donors. The CIT (A) concluded that the initial onus of proving the genuineness of the gifts was discharged by the assessee. 2. Confirmation of Addition under Section 68 by the CIT (A): The assessee contested the confirmation of the addition of Rs. 8,76,000 under Section 68 by the CIT (A). The CIT (A) upheld the addition for two donors, citing discrepancies in their signatures and insufficient evidence to prove the genuineness of the gifts. The Tribunal examined the documents provided by the assessee, including declarations from the donors, confirmation receipts, bank certificates, passports, and income tax returns filed in the USA. Despite these documents, the Tribunal found inconsistencies and inadequacies in proving the creditworthiness and genuineness of the gifts. For instance, the income tax return of one donor, Shri Dilip Patel, indicated a significantly lower amount of gifts than what was claimed to have been given to the assessee. Similarly, the financial capacity of other donors was questionable based on their reported income and the amounts gifted. The Tribunal emphasized the importance of establishing the identity, financial capacity, and genuineness of the transaction, referencing several judicial precedents. It highlighted that merely transferring money through banking channels does not prove the genuineness of the gift without corroborative evidence. The Tribunal concluded that the CIT (A) erred in granting partial relief without adequately considering the A.O.'s findings and remand report. It upheld the A.O.'s decision to treat the gifts as unexplained income under Section 68, dismissing the assessee's appeal and allowing the Revenue's appeal. Conclusion: The Tribunal confirmed the A.O.'s addition of Rs. 21,87,500 as unexplained income under Section 68, dismissing the assessee's appeal and allowing the Revenue's appeal. The Tribunal emphasized the need for substantial evidence to prove the genuineness of gifts and the creditworthiness of donors, aligning with judicial precedents on the matter.
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